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tv   Real Money With Ali Velshi  Al Jazeera America  February 25, 2014 7:00pm-7:31pm EST

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and financial future. this comes after a delayed government until after thursday. those are the headlines. i'm tony harris. "real money with ali velshi" is up next. here on al jazeera america. [♪ music ] >> the ukraine grabs the headlines but it's the violent up rising in venezuela that could really have an impact on americans. i'll tell you why. we're taking the pulse of the housing market recovery with the home builder in houston. and then to the streets of philadelphia where the middle class is fading fast. i'm ali velshi. this is "real money." [♪ music ] >> this is "real money with ali velshi."
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you're the most important part of the show. so join our conversation for the next hour. while the world focuses on events in the ukraine the protracted political crisis in venezuela could effect americans more. venezuela is america's number four supplier of imported oil coming behind canada, saudi arabia, and mexico. student-led protesters in venezuela are demanding that president nicholas maduro step down over his ms mishandling of resources. like ukraine the protests have turned violent with 13 people killed and scores more wounded in recent weeks. well, venezuela possesses some of the largest oil reserves in the world. it's a founding member of opec but venezuela's oil production
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has dropped 29% since 2005. lacks maintenance of the oil infrastructure and a lot less foreign investment are behind that fall. in 2006 venezuela socialist led government nationalized oil exploration and production in the country. critics charged its mismanagement has reeke wreakedc oon the oil industry and the economy. price controls and devalued exchange rates have made it difficult there. all of this has affected exports to the united states. they've dropped off 42% since 2005. the reason why you haven't felt this is because america has largely made up the difference with a boon in oil industry. but the offset has not helped to bring prices down either because oil is a global commodity and
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growing world demand is keeping prices above $100 a barrel. either way americans should pay heed to what is going on in venezuela. it's a country rich in natural resources where shortages of basic necessities are now the norm. it's not just ukraine and venezuela experiencing social unrest. in the last month protesters have been gathering in many places around the world, turkey, thailand, and the uncertainty in some of those countries more than others could eventually weigh on the markets and in turn on your investments. alan joins me now from boston, alan, very good to see you. thank you for being with us. >> thank you. >> alan, first of all when you look to latin america your biggest concern is not venezuela. you think argentina is more of a problem. >> yes, that's right. argentina is beset by unrest. too much inflation, runaway
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deficits, political instability, i think argentina and venezuela are headed to a chaotic political environment that is going to affect brazil and chile. as a geopolitical matter, the united states and it's relationships with south america are at risk. the oil problem is a big one. if venezuela should really go essentially belly up, that is going to--that could raise oil prices for a while to $5 to $10 a barrel. >> first of all, brazil one of the countries we've talked about for several years now as being on an economic growth terror, that's not the case. it's growth has slowed and it will grow a little less or about the same as the united states in 2014. it will start to have an impact on the world. there is a real domino affect if latin america becomes a problem. what is the effect to the rest of us?
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>> it's probably pretty contained. i think argentina, the reason why we're concerned about brazil is we think argentina is really going to go down. in its economy, and in its politics. and argentina buys a lot from brazil and chile, so both of those countries are going to suffer in their economy. brazil has other problems. you put it together, and you got a chunk of latin america in trouble, and that will touch mexico some. now all of that together will be somewhat of a problem for china because china exports into latin america and collectively those countries make a difference to china's experts and china is the second largest economy in the world. and that will effect asia and will effect europe. it's not as big of a deal as the
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eurozone and the euro crisis, but it is enough of a problem that markets pay attention to it, stock market gets nervous, traders bid the price of crude oil up and that price shows up in higher gasoline prices and energy costs, and that's what hits americans. >> that ultimately whether you feel it directly or not has an impact on economic growth as a whole. what is your general sense as we're going into 2014, what is your general sense of how we're equipped in the united states to deal with economic shock? is this going to look like a year where things settle down? we've seen housing numbers were strong in 2013. but we're not sure how it will do in 2014. >> venezuela, brazil, chile argentina are all part of the developing country world, the emerging markets. there are large number of them that we think russia has got
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problems, turkey is in similar situation to argentina and venezuela politically and economically, and in a couple of countries in asia are affected as well. that effects investments. so all together about 15% of global gdp can get dented by worsening situations in the countries that i've named. and that's enough to dent global growth to interfere and be a pediment to stronger global and u.s. economy. but it's not enough--it won't be, in our opinion, the kind of big deal that the european crisis turned out to be. >> it's nice when we have big crisis to compare things to and then we can say it's not going to be as bad as that. we'll keep an eye on it. alan, good to see you, thank you for joining us. >> thank you. >> okay, the top pick from the car critics of consumer reports does not use any gas at all.
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the battery powered tesla is the first american made vehicle voted best rated car from the magazine. lexus was named the top brand by over all quality for the second straight year. ford and jeep sit at the bottom of the brand rankings tied for last. the magazine said ford did well in road tests but it's reliability score was hurt by a complicated and buggy system. ford revealed it's dumping the microsoft based system for one that uses blackberry technology. the weather this winter has made it tough to get a handle on the housing recovery. we will gather to the front line to a contract who are is building homes in houston. and why the city of brotherly love is losing it's middle class and at an alarming rate. keep it here.
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>> strong but slowing down. simple but accurate way to describe the recovery in the u.s. housing market. the most recent evidence of that came today in the case home price index. a very broad measure of index. homes prices rose in 2013. that's the largest annual gain since 2005. that's the strong part. here's the slowing down part. the pace of growth declined one tenth of one percent compared to the month before. that's consistent with other recent signs of slowing. consistent home sales in january fell to the yearie year earlier. nobel prize economist robert schiller whose name is on the case chillier index said that
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home price growth is likely to slow down this year, partly because mortgage rates remain a percentage point above where they were a year ago and rising prices, good news for some, have made homes too expensive for potential buyers. buyers with plenty of purchasing power are making life sweet for home builders who kate tort high end. just ask the largest u.s. luxury home builder, their profits gr grew. the average toll brothers home sold for $695,000. up 10% from 2012. they seem to be in a cautious mood. a recent sentiment plunged 10 points in february. the biggest monthly decline on record. the national association of home
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builders said unusually severe weather conditions was one of the reasons, even though the report said home builders now believe home sell conditions are poor rather than good. but enough of this big picture tuck. let's get some perspective from a real home builder on the ground. the man we have spoken to before. charles candella, he has noticed the market shifting a bit for the market looking for younger buyers, looking for more reasonbly priced homes. one of the homes that his company is working on right now, there they are, charles a couple of guys behind you. tell me about this home that you're in. >> this is probably a little larger home than what we're going to start building. this is about 5200 feet. you know, it's a little higher end home. the ones you were talking about earlier that we're moving towards is going to be more of a townhome type deal somewhere between, say 2500 to 3,000 feet.
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we're shifting to that market. it's just a differentish i guess, a different type of person who is moving to the city now. >> so you're building speck homes. you're a custom home builder, now you're going to build homes that will be sold to people, so they won't be making as many choice? >> right, this is a custom home. this is a home that we're doing for somebody, and they're picking all the finishes, everything. what we're getting into now is a spec home, where we buy the land, build the home and people buy it midway through or towards the end. we're shifting from the larger home like this to a little smaller home, less yards, there is really--there seems to be a high demand for that, and a lot of people moving into the city with no kids or one kid, and they're looking for something
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with very little maintenance. they really don't want to spend $2 million. >> charles, we know that a very large proportion of the homes that are sold in america today are cash purchases, but that's misleading because in most cases these are institution who is are buying up in many cases foreclosures. they're buying lots of homes and renting them out. you're seeing real live people making cash purchases for homes. not getting a mortgage? >> right, we see a lot of it. and we compete against a lot of it, believe it or not, and that's on the side we're trying to buy land, where we're trying to buy lots. we go in, and most of our financing comes from the bank. if they've got somebody that comes in and they're looking at the sail lot or it's to tear down a house, and these people are offering cash, we can say we've got a banking line. they're always going to take the cash. we're competing with that as well as the ever-ballooning, and rising prices of the lots.
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yes, there is a lot of it, as well as on the other end. >> we know in markets like- like--miami or markets like new york the cash buyers who are individuals tend to be non-americans who find it better to investment in u.s.-nominated investments rather than russia, brazil or china. are thewhat about in houston. are they just wealthy houstonens or people from elsewhere? >> i think its both. i just pre-sold a house i'm building, it's $1.4 million, and it's a cash buyer, and it's a foreign person. i've had a lot of of americans, people who are born and raised right here in houston who are cash buyers. it just seem like--i told you this before--it seems like a lot of people with a lot of money. it's not just foreign investors or foreigners who have moved
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into the city. it's the local people as well. >> good to talk to you. we'll see how your business progresses. let's go to chris mayor, proffer of columbia business school, he has advised policies makers and testified to congress on the causes of the housing bubble. good to see. >> you good to see. >> you people have interpreted these housing numbers very differently. some say there is slow down and others say we just came off a year with a 13% increase for the price of a home? what is it, good or bad? >> we're starting to see the effect of interest rates going up. interest rates go up and people start to get off the fence and think, oh i need to buy in the market. we're seeing people feeling
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lessen shoesasm to jump in the market. >> it is still probably going to be one of the lowest rates we see in our lifetime. >> there is no question that you have to go back a very long--maybe we hit slightly lower levels nine months ago but basically for your and my lifetime that we remember, you know, you're going back 30, 40 years to see times before the 1970s and the 1960s and 50s where interest rates were anywhere near this level for buying homes. >> you look at 13% increase in homes. do you see another year of that? now we get into worry some territory where people say, is that sustainable? >> i'm not worried about the price level. if house prices fall 50% and then go up 20%, they're going off a very low base. house prices nationally have collapsed a lot. i'm not worried yet that house prices are at unsustainable levels. what worries me is the lack of
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household formation. you see a lot of people living at home. you're not seeing first-time buyers coming into the market at the same rate, and it's that that is concerning to me more necessarily than the headlines numbers. >> play that out for my viewer. why is household formation important as an economic thing? >> it's important because it's people getting on with their lives and getting on with the economy. when people buy homes, they spend numbers on other things. that helps to stimulate the economy, and eventually those new household formations drive home construction. even though the home construction numbers are up from where they are, where before they were nowhere near the level which would even get us back to kind of normal population growth, which would be $1.25 million to $1.5 million. that would be a normal market, and we're nowhere mere those levels. >> and this is something that
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we're always concerned about with the middle class, jobs and it's income. >> yes, i really worry if we lose the impact of homeownership in our economy we're going to have a cohort of people when they hit retirement age they're going to be more unprepared worse than the numbers seem to suggest because people don't count housing and savings. people who hit retirement age and they don't have that nest egg built up, it's going to be hit worse. >> thank you for joining us. the city of brotherly love, rocky balboa and cheese steaks, but what it's not any more, it's middle class, not like it used to be any way. keep it right here. prima
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>> lisa fletcher with what is coming up on "the stream" . you're asking if hollywood is stuck in a time warp? why. >> america does not look anything like it did 50 years ago. but when you watch a movie you barely know it. we talk to actors why diversity in hollywood is more important than ever. >> hollywood does not have a reputation for being an equal opportunity employer. >> that is true, but the new
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black woman headed there says that is not so. >> with a wide array of video games, comics cartoons and now a >> in philadelphia, i spent a lot of my time in philly. it's a perfect example of a city suffering the decline of the middle class. known in popular culture as a solidly and proudly middle class even blue color town. back in 1970 just a few years before the first "rocky" film was made, it was 59% middle chance. by 2010, 40 years later that number dropped to 42%. that's reporte according to a r. as a result philadelphia is a poorer city than it was the 60
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arsenal and 70s when it was a manufacturing powerhouse. while america starts to split along halfs and have notes. philadelphia is not benefiting from that trend because it has not seen an increase in the up ever class. if the middle class shrank and the upper classes didn't grow, that can only mean one thing. the share of lower class philadelphia grews to 47% of the population making it the single biggest part of the city's population and the least able to support the costs of running a big city. most of the hollowing out of the middle class occurred before 2000 and well before the great recession. joining me now to dig deeper in this report is larry eikle the director of the pew's philadelphia program. thank you for being with us. >> thank you for having yes. >> philadelphia is a beautiful
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place. i call it home. and it really was traditionally a proudly middle class place. people were really okay being middle class, and middle class in the 50's and 60's, and into the 70's in many classes could actually mean blue color. >> it absolutely could. one of the fascinating things we found was in 1970 44% of the people we considered middle class didn't even have a high school degree because there were those blue collar jobs available. that's not the case now. you need a college degree or a lot of college education to be part of the middle class. that's true nationally and it's certainly true in philadelphia. >> so when people say, i've been talking to people about this all day. tell me why philadelphia was hit harder than other cities that you've looked at, what is the answer to that? >> well, it was certainly hit hard.
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whether it was harder than other cities i think is hard to say, but philadelphia was a heavily manufacturing town, and when those jobs disappeared, it took a hard hit, and it maybe took a little longer than some other cities to figure out what the next step was. now you know, it's a heavily dependent on education and the medical sector, and that's certainly working better for the city. >> is the geography of philadelphia in that there are lots of wealthy people who say they are from philadelphia but they live in the wealthy counties in which the property taxes don't go to the city of philadelphia. >> sure, that's certainly part of the issue. i mean, one of the things that was fascinating to us when we did this analysis and compared philadelphia to other cities, a nap shot of 2010 we found that the size of the middle class in philadelphia was not that different than a lot of other
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cities. what was different was the size of the upper income group. in philadelphia was not 9% to 10%. in washington, boston, new york, it's 15%, 16%, 17%. that's a big difference. as you say in those cities some of those people, a lot of those people are actually living within the city limits, that's less true in philadelphia. >> are there obvious ones in places for philadelphia. >> the solutions may be obvious, but they're certainly not easy. you know, in our report we talked about three kinds of solutions. one is to cater specifically to the middle class, to people who are here now are middle class and the middle class people who might want to come. you do that through tax breaks and providing educational options. you do that with lifestyle amenities. the second way is to try to grow the middle class from below. you can do that through
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education, through job training, through workforce development. the third way, and maybe the simplest and maybe the most difficult as well is to simply take care of the urban basics. in any city the basics are jobs, education, and public safety. those are the main concerns of the middle class and the concerns of everyone else. >> put a different way if those things were in place in a better way in philadelphia you have a larger chance of maintaining the middle class that is already there and bringing people in. if you have education and it's a safe city you have a better chance of attracting a middle class resident. >> that's right. and the good news here is the population has been growing for the past six or seven years. we had a real influx of young adults that have given the city a lot of energy, and i think give it an opportunity to sort of change some of these dynamics. >> larry, good to talk to you. thank you for sharing this great
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research with us. larry eickle at the pew trust. some people believe that arizona's initiative to deny business to gays. now the bill was passed primarily with the intent to protect businesses' religious' liberties, but it as it has become way more than that, and it has turned into a battle between business ow owners and civil rights groups. three who supported the bill changed their decision when it became a sword towards religious intolerance, an, and arizona governor jan brewer defends the right that anyone ca that a bus" serve anyone they want.
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here's the deal. the u.s. constitution already enshrines religious freedom in this country. all this law would serve to do is enshrine an arizona's business right to discriminate against gays and lesbians. that would be a step back. join me when we look at a new york cab driver who is working to get a better middle class job. i'm ali velshi, and this is "real money."
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hi i'm lisa fletcher, and you are in stream. is hollywood stuck in a time warp? when you watch a movie, you barely know that america looks nothing like it looked 50 years ago. ♪ the entertainment industry eagerly awaits vanity fair's annual hollywood feature. the most